weak Consumer Fraud Act almost helped make attorneys $9.4 million richer. Thanks to U.S. Magistrate Judge Patty
Shwartz’s diligence and attention to detail, however, consumers were spared
having to absorb this expense.
Here are the facts. As reported in the New
Jersey Law Journal, some Volkswagen owners complained that their 1997 –
2005 Passat, Jetta, New Beetle, Golf, and Touareg models leaked in heavy
rain. In some cases it damaged the car’s
interior, or its contents, varying in severity.
A nationwide class action lawsuit was filed in Newark, under New Jersey’s
Consumer Fraud Act. They were also
accused of breaching express and implied warranty and the “duty of good faith
and fair dealing.”
Guercio v. Volkswagen of America Inc., two firms represented the 5.5
million class members, representing 3 million vehicles. The lawyers estimated a settlement of $142
million earlier this summer, and sought $22.5 million (15.8 percent) for
themselves in fees. Eventually, both
sides agreed to $90 million instead.
And then the judge scratched beneath the surface. The plaintiffs’ expert estimate called for
$28 million in “preventative maintenance,” including the cost of future labor,
parts, towing, and loaner cars. But the
judge reduced this amount by more than half – to $13.1 million, because towing
and loaner cars are already covered by the dealer, making the inclusion of
these fees in the settlement redundant and without benefit to the
consumer. Further, the Court would be
double counting if it agreed to damages for both avoiding future repairs and
the declining car value if it has water damage.
“While the two components address different consequences of
the avoided water damage,” said Judge Shwartz, “one of the two will never come
about because the maintenance avoids it.”
Shwartz also recognized that it was improbable that 100
percent of eligible class members would claim their award, and further reduced
the settlement. $69 million, with
thirteen percent of it reaching the trial lawyers instead of fifteen percent,
was what the Judge ultimately decided was appropriate. In what could be a warning to other
litigators, she noted that the two years spent on recovery and three year
period from the time the complaints were filed was untimely, and that the
settlement didn’t “represent a particularly speedy resolution.”
New Jersey Law Journal reports that the Court received over 200 objections
to the settlement. Many class members
felt that that the settlement did not adequately compensate them, and that the
attorney fees were still too high.
In the end, Volkswagen
owners will probably have to pay some of their repair costs out-of-pocket
with cash. But, thanks to the Judge, the
trial bar will have less cash to line their pockets with, too.